'We will never understand why people like Koo and Krugman do not for once stop to think about this and consider that their theories might simply be wrong.'<blockquote>'No amount of government intervention can alter this fact in a positive manner – it can only lead to even more distortions. In what way any of the tree 'policy choices' we are now allegedly left with would improve this situation is a complete mystery. It should be obvious that neither protectionism nor dollar devaluation can possibly improve the economy's status. However, it should be just as obvious that deficit spending is likewise destined to fail. Every single cent the government spends must be taken from the private sector, since the government produces no wealth and possesses no hidden stash of resources it can draw on. So to the exact same extent as the government increases its spending, the private sector will be forced to reduce its spending and investment. Resources will then simply be commandeered by bureaucratic fiat instead of the voluntary decisions of market participants. How is that going to improve the economy? As a matter of fact, the past decade has not only seen the biggest bout of monetary inflation of the entire post WW2 era, it has also seen the biggest increase in deficit spending since WW2. Obviously, neither the former nor the latter have had any positive effect so far. We will never understand why people like Koo and Krugman do not for once stop to think about this and consider that their theories might simply be wrong.
- Acting Man,
Bernanke In Denial, June 8th, 2011</blockquote>
'Not surprisingly, the smaller banks are the only ones that are vehemently protesting that the new regulations are making life impossible for them. You'll never hear Citigroup or Bank of America seriously complaining about the new laws. They know that in the end, these regulations have only created an even more powerful cartel of big banks.'<blockquote>'In this connection it is worth mentioning the 'Frank-Dodd' regulatory monstrosity again. Many people erroneously believe that the banks will somehow be 'punished' for their transgressions during the bubble and 'put on a tight leash' by this telephone-book sized law. In other words, one would suppose that the big bankers really hate it. We tend to think that it is more likely that they actually wrote it. All the 'too big to fail' banking institutions are today even bigger than they were before the crisis. The impenetrable thicket of regulations meanwhile ensures that they have even less to worry about the competition from upstarts than before. Not surprisingly, the smaller banks are the only ones that are vehemently protesting that the new regulations are making life impossible for them. You'll never hear Citigroup or Bank of America seriously complaining about the new laws. They know that in the end, these regulations have only created an even more powerful cartel of big banks. Consumers will over time end up paying through the nose for all of this, as whatever additional administrative costs the new regulations are creating will be passed on to bank customers. One must also keep in mind here that the more highly concentrated a banking system becomes, the less constraints there are on the concerted expansion of circulation credit and fiduciary media. In short, it makes inflation of the money supply that much easier. As it were, the privilege of creating new money from thin air is functionally not different from legally sanctioning the counterfeit money printing press in Tony Soprano's cellar. Obviously, this privilege has remained untouched.
We have yet to hear Taibbi mention this particular aspect of the system, although we must admit he did a fairly good job of getting closer to the central issue when he wrote a critique of the Fed's 'emergency' measures during the crisis ('
The real house wives of Wall Street'). This article is valuable because it hits on the above mentioned amalgamation of private and State interests and shines a light on the big fat spider in the center of the web – the Federal Reserve. Alas, even this otherwise worthy piece is deficient. Taibbi mentions that all these bailout deals that evidently favored mainly well-connected insiders were done on the 'tax payer's dime'. Partly this is correct, but he fails to note where the 'Fed dollars' as he calls the flood of money showered on the clearly undeserving really came from – namely, thin air.
As such it is not only detrimental to tax payers, but to every participant in the economy who is a 'late receiver' of the newly created money. Those who got first dibs on the funds (like apparently the wily wives of Wall Street executives who had the presence of mind to quickly set up 'TARP' related companies on the Cayman Islands before the money began to rain down) certainly profited from the inflation of the money supply. Every other holder of dollars drew the short stick in this exercise.
Yesterday an article in the NYT caught our eye that nicely exemplifies the incestuous relations between government and the big banks. One of the authors of the new banking regulations, the self-anointed 'top cop' of Wall Street, Barney Frank, has just held a fundraiser – on Wall Street!'
- Acting Man,
State-Capitalism And The Banking Cartel, June 9th, 2011</blockquote>
Context<blockquote>
'..We must return to independent and sensible monetary policies..' - Angela Merkel